Analyst Opinion – It’s a shame we can’t have a DVD of a great Apple product pitch. When Apple gets it right, no one does it better. They can miss from time to time, but it’s such a rare occurrence that I actually can’t remember the last time they truly screwed up. This year’s keynote was, with one noted exception, one of Apple’s best. In fact, it actually may be a better example just because of that exception.
While the lack of Steve Jobs, the exception I’m referring to, took some of the sparkle out of the pitch, it also made the result seem more achievable as the common pushback I get when I suggest a vendor tries to imitate Apple on stage is that “no one can be Steve Jobs”. So, this may not have been a legendary as a Steve Jobs’ pitch, but this level of execution is now clearly achievable and it is a lesson for anyone who wants to build demand for their products, services, platform, or even securities.
In addition, around 15 years ago and during the ramp to the Windows 95 launch, I met with Apple and suggested they needed to up their game. Otherwise they were going to take a bath in the market. They didn’t agree and saw Windows 95 as just a copy of one of their older platforms. If they had not brought back Steve Jobs, they likely would have gone under as a result of that thinking and they are clearly not on that path against a vastly more capable Windows 7. Microsoft is coming to market loaded for bear and Apple, this time, is entering the battle in a way where they could actually take significant share this time, though they still have at least two exposures that could derail their strategy.
The magical Apple pitch
Typically, when you see executives present a pitch, they will start off by telling the audience what a great job they have done and toss up a bunch of financial information, or market demographics, or things even most people inside the company would categorize as really boring. I think most seem to think these events are all about getting credit. I’m convinced if some of these guys were race car drivers they would, after getting in the car, claim victory because they had accomplished what they set out to do while others ran and competed by actually racing.
Companies will often have presenters who, while having long and important sounding titles, don’t seem like they’ve ever received any speech training and are vocal range-challenged, so if you haven’t gotten enough sleep, you can catch up during much of the pitch. Finally, when they do showcase products, you often wonder if they have ever used them or seen them before they read the speech. There is no apparent passion in much of anything with their primary goal seeming to be getting through the talk without making a mistake or drooling on the front row.
Apple, in contrast, isn’t like this and you don’t sleep through an Apple pitch. At the most recent presentation and after starting about two minutes late, they took five minutes to talk about things like their impressive growth over the last couple of years of about 3X the installed base, which sets a momentum tone, and then Apple was into products and those products turned into the stars of the show. Each was showcased in its best light by people who seem to have a deep knowledge of what the products are and at least appear to have used them. The underlying message isn’t “hey here is a product”, it is this is something you know you’ll want and the focus it to build interest and demand for the offerings. Others can go into detail on what was shown. But how Apple does it sets the bar for the technology industry.
Snow Leopard vs. Windows 7
Microsoft is marketing again for the first time at a level and quality in line with Windows 95 and Windows 7 is the most finished new OS they have likely ever brought to market. This creates a problem for Apple who is enjoying growth, but still needs people to swap off Windows if they want to continue to see it. In my view, regardless of the improvements in Snow Leopard, Windows 7 could stall Apple’s growth, because folks don’t like to move and all Microsoft has to have with Windows 7 is “good enough” and it’s at least that good.
But Apple is gaming this well. First they know that it is the Windows XP user that is most exposed and they know that the upgrade from Windows XP will not only be painful. It will be expensive. They also know that Windows 7 slipped late into the cycle and, with an October 22nd launch, it will miss the critical back to school ramp. Unfortunately for Apple, Snow Leopard also slipped and they will miss the ideal end of August window, but not by much, and they can mitigate this scenario a bit by gaming the system.
What I mean by that is they know that market momentum is generally measured by shipments, not sales, and that a September launch means they can load the channel with shipments in the third quarter, while an October launch means Microsoft and its vendors will be bleeding down inventory for the October launch during the same time frame. When numbers are reported, the combination should show Apple with a massive, if overstated, market share gain creating the impression of a rush to the platform right before the critical fourth quarter. This kind of thing can result in the technology equivalent of a feeding frenzy and the result could be the biggest market share gain in their history.
This isn’t even considering the strong synergy that is being created between their PC, iPhone, and iPod (Touch) offerings, which will positively impact their momentum during that period. Even though Microsoft is marketing sharply to counter this Back to School ramp, Microsoft would have to completely stall the market in September, doing even more damage to their own and PC OEMs revenue streams, which effectively takes this off the table for them. At the same time, the under $30 upgrade price that Apple is putting out there for Leopard users not only makes the MacOS appear to be better long term to XP users facing a substantially bigger cost of upgrade, but it protects Apple’s base (most will likely take the upgrade) from an likely Microsoft response.
Wrapping up
This appears to be incredibly well thought out and, barring a problem, could pay off very well for the company. There are two potential problems that we’ll revisit closer to the launch (because they may fix one or both of them.) One is that malware is increasingly working on Macs, because the attacks are focusing on websites and not platforms, and Apple’s messaging on having the most advanced OS is both inaccurate and less desirable than what they actually will have – it is the most refined product. I think people would rather have something that is refined at the moment than cutting edge, because they want it to just work.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently he provides his services to most of the major technology and media companies.
The opinions expressed in this commentary are solely those of the writer.
